'It is now clear that the US model of free-market capitalism has failed to support a fair and healthy society. We need to stop trying to ape the US and to learn from the more successful models of Scandinavia and North- West Europe'
It seems that the British, far from being a kind of bridge between the US and Europe, are highly confused by the conflicting attractions of the US 'free market' and European 'social market' societies.
Of course, we must remember that all are market rather than centrally-directed economies - and also that not even the US is really a totally free market economy - the US government is one of the world's most protectionist when it comes to interfering in free enterprise by impeding foreign incursions into sensitive markets like energy, defence, subsidising key industries like aviation and agriculture and using international institutions like the World Bank to promote US interests. The French do not have it all their own way when it comes to protectionism!
In our minds, the most interesting comparisons are between the Dutch, Scandinavian and potentially the German models of economic society and that of the USA. Interestingly, Canada, the closest neighbour to the US has a culture that is probably closer to the Scandinavian model than that of the US.
So what are the differences between the two models? Here is a 'first cut' at identifying some of them.
The 'Euro-Scandinavian' model has a number of salient characteristics:
- There is a clear recognition that the public interest is superior to that of unfettered individualism and that the benefits of living in a society are balanced by a duty to give up some personal interest for the benefit of the whole.
This understanding of the overriding interest of society as providing the best possible living environment for the maximum number of its members has resulted in a number of outcomes, in particular:
- High personal taxation, in return for a high level of public services, in particular health, education and social benefits
- Low levels of inequality and poverty, by comparison with the US (And UK). Highly educated populations, with little structural poverty.
- Relatively high levels of investment in the public infrastructure such as rail and road transportation.
Public infringements into the freedom of individuals to do as they like are not greeted by the levels of resistance that an 'Anglo-Saxon' might expect - not because there is coercion, but because it fits strong cultural norms. In general, there is consensus that extremes of wealth and poverty are bad, that society owes it to individuals to provide good education and health provisions. In some countries, it is not 'done' to flaunt personal wealth.
This is not to say that some people do not leave, for example, Sweden, to live in lower tax environments, but it is not the norm.
Some might say that such an environment will completely stifle enterprise, innovation and wealth creation but this does not appear to be the case. Most of the countries which follow the 'model' we have described are wealthy and have more than their fair share of modern high-tech industry, as well as quite high levels of innovation and enterprise. Some have high domestic unemployment, but very successful export performances - and the unemployed are often supported by a high level of social benefits - to the point of decreasing the mobility of labour and take-up of low-paid occupations.
The U.S on the other hand, seems to exhibit some quite different tendencies:
- Considerable suspicion of the 'state' as representing the public interest, except in foreign affairs and in protecting national interests outside the national boundary.
- More emphasis on the individual, the family and voluntary organisations as representing the basic units of human society - remember Margaret Thatcher's remark, to the effect that there was no such thing as Society, only individuals and families.
- Lower personal taxation.
- High opportunities and rewards for individual enterprise and success.
- A high level of support for economic individualism, and little resistance to shows of personal affluence, even when contrasted with relative poverty.
The social outcomes are quite different - the US exhibits high levels of risk-taking, innovation and entrepreneurialism. Investment in R&D and university research is high by international standards (but not higher than all Euro-Scandinavian countries).
The levels of wealth creation are high, but the distribution of wealth is extremely unequal by European standards.
The levels of provision of such services as health and education is high for the wealthy, but lower for those of below average wealth - and extremely low for the poor.
There are therefore several distinct manifestations:
- Schisms between rich and poor - as seen in the case of New Orleans.
- Poor general provision of public services with comparison with Euro-Scandinavian countries - especially in public health, education, social welfare and public transport.
- Relatively high levels of crime and violence and a high prison population.
In addition, the state of public finances is very suspect as the high levels of public debt indicate - so there is some doubt as to whether the current state of affairs is sustainable.
We have demonstrated to ourselves at least, that both 'models' demonstrate strengths and weaknesses and that neither provide a perfect example to copy.
The US seems to be creating a large and possibly permanent underclass with gross inequalities in opportunity and access to basic services like health and education. The wealthy and the poor seem also to be becoming segregated.
There is a strong risk that the quality of public services will become so poor that they cannot support a civilised modern society and that eventually the US may not be able to sustain its excessive private consumption without a collapse of civil order.
The Euro-Scandinavian cultures run the risk of creating economies that stifle enterprise and innovation. Allied to this, large portions of the population may become excessively dependent on the state, which consumes an excessive portion of national wealth and inhibits vigorous wealth creation.
We believe that there is no need to present the differences as representing absolutes. It is possible to create societies that are hybrids - not the simplistic 'Third Way' once espoused by Tony Blair. (there is an infinite number of variations). We do not have to copy one or the other lock, stock and barrel - but maybe we have to decide on our inclinations.
However, there is one fundamental question to be addressed before we start - and that is 'What is the purpose of Society?' Answers can range from minimal, to provide national defence, all the way to providing the best lives for the maximum number of its members.
The choice is ours to make. What balance do we want between unfettered individualistic enterprise and the overall good of 'society'? We shouldn't leave such choices to politicians, they are too important.
Maybe readers might guess that the authors incline somewhat towards Euro-Scandinavian values - the more so as a result of having worked and lived in the US and Canada and travelled extensively in Scandinavia and Germany.